Penney denies rumor of bankruptcy counsel hire as stock falls

Oct 15 (Reuters) - A J.C. Penney Co Inc spokeswomandenied a market rumor on Tuesday that the department store chainhad hired bankruptcy counsel, as shares slid as much as 8.3percent.

Penney spokeswoman Kristin Kays said there was "no truth tothe rumor," origins of which were unclear.

Shares were down 7.4 percent to $7.29 in afternoon tradingin heavy selling, including a high number of large block trades.

Some 32.5 percent of Penney shares are held short byinvestors betting against the company's stock rising, making theissue volatile.

Penney has been struggling to revive sales after a failedexperiment in 2012 to go upmarket alienated long-time shoppersand depleted its cash reserves. The company incurred huge lossesand spent large amounts of money on store remodels.

Earlier this month, Penney closed a public offering of newshares that raised $785 million in a sale partly meant toreassure suppliers and their financiers that it had enough cashon hand.

Penney said last week that it expected to have $2 billion inliquid assets at the end of the fiscal year and that it expectedsales trends to continue improving through the end of the year.